What Is a Fronting Carrier?
A fronting carrier issues your policy, even when it transfers much of the risk to another insurer. You generally bring a claim to the company named on the policy, so check that name and any written right to claim directly against a reinsurer.
What Does a Fronting Carrier Do?
In a fronting arrangement the insurer of record puts its name on the policy, then passes the risk to a reinsurer, often in exchange for a commission. The company on the policy is frequently admitted where the risk sits; the reinsurer often is not.1
Reinsurance is a contract between that issuing insurer and the reinsurer. The reinsurer's duty arises after the issuing company has incurred liability on the original policy. The policyholder's claim still runs to the insurer of record.3,2
What Does a Fronting Carrier Not Prove?
Not every reinsurance cession is fronting. Ordinary quota-share or excess-of-loss covers can leave the ceding company with a large retained share. Ceding most of the premium is not, by itself, a legal test that the arrangement is a front.2
A cut-through is a separate contractual path that can let the original insured look to the reinsurer. Without that path, the reinsurer generally has no direct obligation to the policyholder.2
The fronting company's license is not the reinsurer's license.1
What Should You Confirm About a Fronting Carrier?
3 documents, numbered as cited. Open the sources